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The Random Coefficients Logit Model Is Identified

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  • Patrick Bajari
  • Jeremy Fox
  • Kyoo il Kim
  • Stephen P. Ryan

Abstract

The random coefficients, multinomial choice logit model has been widely used in empirical choice analysis for the last 30 years. We are the first to prove that the distribution of random coefficients in this model is nonparametrically identified. Our approach exploits the structure of the logit model, and so requires no monotonicity assumptions and requires variation in product characteristics within only an infinitesimally small open set. Our identification argument is constructive and may be applied to other choice models with random coefficients.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14934.

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Date of creation: Apr 2009
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Publication status: published as Fox, Jeremy T. & Kim, Kyoo il & Ryan, Stephen P. & Bajari, Patrick, 2012. "The random coefficients logit model is identified," Journal of Econometrics, Elsevier, vol. 166(2), pages 204-212.
Handle: RePEc:nbr:nberwo:14934

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  2. Ichimura, H. & Thompson, S., 1993. "Maximum Likelihood Estimation of a Binary Choice Model with Random Coefficients of Unknown Distributions," Papers, Minnesota - Center for Economic Research 268, Minnesota - Center for Economic Research.
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  7. Amit Gandhi & Jeremy T. Fox, 2009. "Identifying Heterogeneity in Economic Choice and Selection Models Using Mixtures," 2009 Meeting Papers, Society for Economic Dynamics 165, Society for Economic Dynamics.
  8. Magnac, Thierry & Maurin, Eric, 2007. "Identification and information in monotone binary models," Journal of Econometrics, Elsevier, Elsevier, vol. 139(1), pages 76-104, July.
  9. J. A. Hausman & D. A. Wise, 1976. "A Conditional Profit Model for Qualitative Choice: Discrete Decisions Recognizing Interdependence and Heterogeneous Preferences," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 173, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Jeremy T. Fox & Amit Gandhi, 2009. "Identifying Heterogeneity in Economic Choice Models," NBER Working Papers 15147, National Bureau of Economic Research, Inc.
  11. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
  12. Briesch, Richard A. & Chintagunta, Pradeep K. & Matzkin, Rosa L., 2010. "Nonparametric Discrete Choice Models With Unobserved Heterogeneity," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 28(2), pages 291-307.
  13. Stinchcombe, Maxwell B. & White, Halbert, 1998. "Consistent Specification Testing With Nuisance Parameters Present Only Under The Alternative," Econometric Theory, Cambridge University Press, Cambridge University Press, vol. 14(03), pages 295-325, June.
  14. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, Econometric Society, vol. 63(4), pages 841-90, July.
  15. Eric Gautier & Yuichi Kitamura, 2011. "Nonparamatric estimation in random coefficients binary choice models," Working Papers, HAL hal-00403939, HAL.
  16. Patrick Bajari & Jeremy T. Fox & Kyoo il Kim & Stephen P. Ryan, 2009. "A Simple Nonparametric Estimator for the Distribution of Random Coefficients," NBER Working Papers 15210, National Bureau of Economic Research, Inc.
  17. Shakeeb Khan & Elie Tamer, 2010. "Irregular Identification, Support Conditions, and Inverse Weight Estimation," Econometrica, Econometric Society, Econometric Society, vol. 78(6), pages 2021-2042, November.
  18. Jeremy T. Fox & Kyoo il Kim, 2011. "A Simple Nonparametric Approach to Estimating the Distribution of Random Coefficients in Structural Models," NBER Working Papers 17283, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Naoki Wakamori & Angelika Welte, 2012. "Why Do Shoppers Use Cash? Evidence from Shopping Diary Data," Working Papers, Bank of Canada 12-24, Bank of Canada.
  2. Mathias REYNAERT & Frank VERBOVEN, 2012. "Improving the performance of random coefficients demand models: the role of optimal instruments," Center for Economic Studies - Discussion papers, Katholieke Universiteit Leuven, Centrum voor Economische Studiën ces12.07, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  3. Elena Krasnokutskaya, 2012. "Multi-Attribute Auctions with Unobserved Heterogeneity in Supplier Qualities and Buyers Tastes," 2012 Meeting Papers, Society for Economic Dynamics 283, Society for Economic Dynamics.
  4. Jeremy T. Fox & Kyoo il Kim, 2011. "A Simple Nonparametric Approach to Estimating the Distribution of Random Coefficients in Structural Models," NBER Working Papers 17283, National Bureau of Economic Research, Inc.
  5. repec:hal:wpaper:halshs-00736556 is not listed on IDEAS
  6. Jean-Pierre H. Dube & Günter J. Hitsch & Pranav Jindal, 2012. "The Joint Identification of Utility and Discount Functions From Stated Choice Data: An Application to Durable Goods Adoption," NBER Working Papers 18393, National Bureau of Economic Research, Inc.
  7. Olivier Allais & Fabrice Etile & Sebastien Lecocq, 2013. "Mandatory Labels, taxes and market forces : An empirical evaluation of fat policies," Working Papers 221517, Institut National de la Recherche Agronomique, France.
  8. Steven T. Berry & Philip Haile, 2010. "Identification in Differentiated Products Markets Using Market Level Data," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1744R, Cowles Foundation for Research in Economics, Yale University, revised May 2012.
  9. Andrew Chesher & Adam Rosen, 2012. "An instrumental variable random coefficients model for binary outcomes," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP34/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  10. Patrick Bajari & Jeremy T. Fox & Kyoo il Kim & Stephen P. Ryan, 2009. "A Simple Nonparametric Estimator for the Distribution of Random Coefficients," NBER Working Papers 15210, National Bureau of Economic Research, Inc.
  11. Cerquera Dussán, Daniel & Ullrich, Hannes, 2010. "Consumer welfare and unobserved heterogeneity in discrete choice models: The value of alpine road tunnels," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 10-095, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  12. Burda, Martin & Harding, Matthew & Hausman, Jerry, 2012. "A Poisson mixture model of discrete choice," Journal of Econometrics, Elsevier, Elsevier, vol. 166(2), pages 184-203.
  13. Hyungsik Roger Moon & Matthew Shum & Martin Weidner, 2012. "Estimation of random coefficients logit demand models with interactive fixed effects," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP08/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  14. Olivier Allais; & Fabrice Etile; & Sebastien Lecocq, 2012. "Mandatory labelling, nutritional taxes and market forces: An empirical evaluation of fat policies in the French fromage blanc and yogurt market," Health, Econometrics and Data Group (HEDG) Working Papers, HEDG, c/o Department of Economics, University of York 12/14, HEDG, c/o Department of Economics, University of York.
  15. Matzkin, Rosa L., 2012. "Identification in nonparametric limited dependent variable models with simultaneity and unobserved heterogeneity," Journal of Econometrics, Elsevier, Elsevier, vol. 166(1), pages 106-115.
  16. Stefan Hoderlein & Lars Nesheim & Anna Simoni, 2012. "Semiparametric estimation of random coefficients in structural economic models," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP09/12, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.

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